econ 361 chapters 1-14 review questions
suppose you are running a business and get a revenue of $1000, supplies and labor cost $700. you have an outside option that would pay $100. what are your economic profits?
$200
suppose the the demand curve for good x is given by x = I/2px. What is the income elasticity of demand when I = 10 and Px = 2? a. 0.25 b. 2.5 c. -0.25 d. 1
1
suppose that a price-taking firm participates in a perfectly competitive market. identify the truthfulness of the following statements: 1. in the short-run, the firm has output greater than zero only if profit is greater than 0. 2. in the short-run, the firm has output greater than zero only if the producer surplus is greater than 0.
1 is false and 2 is true
given the demand (p = 16 -Q) and marginal cost (MC = 4) displayed below, what is the total revenue for a first-degree price discriminating monopolist? (graph PM q6)
1/2 (16-4)(12) + 12*4
if a monopolist has mc = 4 and faces one consumer with demand P(Q) = 2 - Q and sets the price in the first block of a two-block tariff to be P1 = 16, what price should the monopolist charge in the second block to maximize profit?
10
a firm faces production function Q (L,K) = LK with a production target of Q0 = 8. Te cost of labor is w = 1 per unit and the cost of capital is r = 2 per unit. if the firm is stuck with k = 6 in the short turn, what is their total fixed cost
12
given the demand (p = 16 - Q) and marginal cost (mc = 4) displayed below, what is the total revenue for a two-block tariff with P1 = 14 and P2 = 6? (graph PM q7)
14*(2-0) + 6*(10-2)
a monopolist faces demand curve Q = 15P^-3 and marginal cost MC(Q) = 10, what price should be set to maximize profit?
15
if the total cost of producing two units is 70, and the average fixed cost of producing two units is 20, what is the average variable cost of producing two units?
15
in the short-run there are 16 identical firms in a market. each has TC(Q) = 100 + Q^2. If 36 of the fixed cost are sunk, then what is the shutdown price?
16
if the short-run total cost is given by STC(Q) = 15 + 2Q^2, and 7 of the fixed costs are sunk, what is the total variable cost when production is Q = 3 ?
18
if the short-run total cost is given by STC(Q) = 15 + 2Q^2, and 7 of the fixed costs are sunk, what is variable cost when production is Q =3?
18
suppose a monopolist faces a demand curve of P(Q) = 24 - 2Q and has a total cost of TC(Q) = 2Q^3. what price should a uniform pricing monopolist set in order to maximize profit?
18
suppose demand in a perfectly competitive market is q = 8 - p and supply is q = 3p. what is the consumer surplus at the market equilibrium?
18
suppose the demand is given q = 10 - p. what is the consumer surplus when the price is p = 4?
18
a monopolist faces demand curve Q = 25p^-2 and marginal cost MC(Q) = 10 what price should he set to maximize profit
20
assume that a firm operates in the short-run with fixed level of capital K = 5 and production function Q(K,L) + KL with production target Q = 100. how much labor should the firm use in the short run?
20
assume that a firm operates with production function Q(K,L) = KL, with production target Q = 32. the price of labor is w =2 and the price of capital is r =1. how much labor should the firm use in the long run?
4
if the short-run total cost is given by STC(Q) = 32 + 2Q^2, and 7 of the fixed costs are sunk, what is the minimum efficient scale?
4
suppose demand in a perfectly competitive market is q = 12 - p and supply is q = p. if there is a price floor at p = 8 what is the lowest deadweight loss possible in the market?
4
consider the graph below, and assume that the price is p = 4. what is the consumer surplus?
7
suppose the industry demand curve is q = 10 - p and that all firms in the industry face long-run total cost equal to LRTC(Q) = 4Q^2 - 2Q^3. How many firms will there be in the long-run perfectly-competitive equilibrium?
8
suppose the market demand is p(q) = 10 - Q and the marginal cost is MC =2. what is the dead weight loss created by uniform pricing monopolist?
8
a monopolist faces demand curve P(Q) = 12 - Q and marginal cost MC(Q) = 2Q what price should he set to maximize profit?
9
what is the cost-minimizing combination of labor and capital for this firm that is trying to produce Qo = 100
A
given the demand and marginal cost displayed below, what is the consumer surplus with a profit-maximizing uniform-price monopolist? (graph PM q11)
ABC
given the demand and marginal cost displayed below, what is the profit for a profit-maximizing uniform-price monopolist?
BC
given the demand and marginal cost displayed below, what is the profit. for a profit-maximizing uniform-price monopolist? (graph PM q12)
BC
farmer john owns A acres of farm and is trying to maximize profits by looking at the price of corn (Pc) and the price of soybeans (Ps) choosing how many acres of corn (C) to plant and how many acres of soybeans (S) to plant. Identify the truthfulness of the following statements: I. The endogenous variables are C, S, and A II. The objective function is A = C + S
Both I and II are false
suppose there is a tax of T in a market as displayed in the plot. which of the following areas represents deadweight loss due to the tax? (graph PM q18)
CEG
in the short-run, a firm would want to produce a positive amount of goods Q1 > 0 if,
NSFC + TVC(Q1) > SFC
a monopolist produces in two plants: one in tucson with MCt = 4Q and another in Los Angeles with MCla = 8Q. if a monopolist want to produce 12 units how should he divide them between the plants?
Qt = 8 in Tucson and Qla = 4 in Los Angeles
which of the following is true about the relationship between the long-run total cost (TC(Q)). and the short-run total cost (STC(Q))?
STC (Q) is always higher or equal to TC(Q)
which of the following is never true in the short-run?
a firm that earns positive profits goes out of business
which market would you expect to have the lowest deadweight loss?
a perfectly competitive market
Identify the truthfulness of the following statements: I. If there is a dominant strategy it will be part of a Nash Equilibrium. II. If there is a dominated strategy it will not be part of a Nash Equilibrium a. both I and II are true b. I is true and II is false c. Both I and II are false d. I is false and II is true
a. Both I and II are true
Suppose the consumer faces the utility function U(C,F) = min (2C,3F), which of the following baskets would be most preferred? a. C = 10, F = 10 b. C = 9, F = 90 c. C = 9, F = 5 d. C = 90, F = 5
a. C = 10, F = 10
suppose that a consumer consumer housing (H) and food (F). The price of housing is $1 and the price of food is $2, while the consumer's income is $40. The consumer's level of satisfaction is measured by H + F and the consumer wishes to maximize satisfaction. The consumer's constraint is: a. H + 2F </ 40 b. max H+F c. maxH+2F d. h+f</ 40
a. H + 2F </ 40
identify the truthfulness of the following statements: I. When the marginal product of labor is falling, the average product of labor is falling. II. When the marginal product curve lies above the average product curve, then average product is rising. a. I is false and II is true b. I is false and II is false c. I is true and II is true d. I is true and II is false
a. I is false and II is true
suppose the market demand is P = 100 - Q and firm 1 has a marginal cost MC1 = 3 and firm 2 has marginal cost MC2 = 4. Which of the following is a Bertrand equilibrium if players can set prices to the nearest cent? a. P1 = 3.99 and P2 = 4 b. P1 = 3 and P2 = 4 c. P1 = 4 and P2 = 3.99 d. P1 = 4 and P2 = 4
a. P1 = 3.99 and P2 = 4
Which of the following conditions would not favor cooperation in a repeated prisoner's dilemma game? a. cheating is difficult to detect b. players are patient c. interactions are frequent d. one-time gain from cheating is relatively small compared to the payoff for cooperating
a. cheating is difficult to detect
which of the following statements regarding exogenous and endogenous variables is correct? a. endogenous variables will always be determined within the model b. exogenous variables change as a result of changes in endogenous variables c. the set of exogenous variables in any economic model should take into account the rich detail of the world so should be limitless d. the only variables that are relevant to the market equilibrium are the endogenous variables, as they are determined within the model
a. endogenous variables will always be determined within the model
a graph that plots the consumer's level of consumption of a food against the consumer's income is called a(n) a. engel curve b. indifference curve c. price-consumption curve d. demand curve
a. engel curve
to solve the utility-maximization problem, you do the following: a. fix a budget line, and the find the indifference curve furthest to the northeast that still intersects the given budget line. b. fix an indifference curve, and find the budget line furthest to the northeast that still intersects the given indifference curve c. fix an indifference curve, and find the budget line furthest to the southwest that still intersects the given indifference curve d. fix a budget line, and find the indifference curve furthest to the southwest that still intersects the given budget line
a. fix a budget line, and the find the indifference curve furthest to the northeast that still intersects the given budget line.
suppose the production function is Q = 3K + L. What is the elasticity of substitution? a. infinity b. 3 c. 1 d. 0
a. infinity
if two firms are competing, each using a low price guarantee a. leads to higher profits for firms but lower consumer surplus b. leads to power profits for the firms but higher consumer surplus c. leads to power profits for the firms and lower consumer surplus d. leads to higher profits for the firms and higher consumer surplus
a. leads to higher profits for the firms but lower consumer surplus
suppose that you have a graph that has good x on the x-axis and good y on the y-axis. What happens to the budget line as the price of good y decreases? a. moves outward along the y-axis, doesn't move on x-axis b. moves inward along the x-axis, doesn't move on y-axis c. moves outward along the a-axis, doesn't move on y-axis d. moves inward along the y-axis, doesn't move on x-axis
a. moves outward along the y-axis, doesn't move on x-axis
Consider a market with demand P(Q) = 100 -Q where there are two identical firms with MC = 20. In a Bertrand duopoly, if firm 1 sets a price of P1 = 20, what is the best response for firm 2? a. multiple choices are correct b. p2 = 20 c. none of the choices are best responses d. p2 = 21 e. p2 = 19
a. multiple choices are correct
which of the following is not a common value auction? a. people bidding on a piece of art b. people bidding on the los angeles dodgers c. tv stations bidding on the olympics d. firms bidding on a plot of land for oil drilling
a. people bidding on a piece of art
in a stackleberg duopoly model, firms set a. quantity sequentially b. prices sequentially c. prices simultaneously d. quantity simultaneously
a. quantity sequentially
suppose that for all combinations of good x and good y, the marginal rate of substitution of good x for good y is equal to twenty, MRSx,y = 20. What can we say about the consumer's preferences for good x and good y? a. the consumer views good x and good y as perfect substitutes b. the consumer views good good x and good y as perfect complement c. the consumer's preferences can be represented with a Quasi-Linear utility function. d. none of the other answers are corrcet
a. the consumer views good x and good y as perfect substitutes
the concept of compensating variation means: a. the price in income necessary to restore the consumer to the initial level of utility as price changes b. the income effect c. the substitution effect d. the change in income necessary to hold the consumer at the final level of utility as price changes
a. the price in income necessary to restore the consumer to the initial level of utility as price changes
suppose the supply curve for strawberries is Qs = 10 + 4P and the demand curve for strawberries is Qd = 25 - P. What can we say about the market when the price is P = 6? a. there is an excess supply of 15 b. none of the other answers are correct c. there is an excess demand of 15 d. the market is in an equilibrium
a. there is an excess supply of 15
a low price guarantee is an example of what strategy? a. tit for tat b. always defect c. grim trigger d. always cooperate
a. tit for tat
which of the following would allow us to estimate the demand curve in a given market: a. two equilibrium points, one before and one after a shift in the supply curve b. two equilibrium points, one before and one after a shift in the demand curve c. many years of data d. many different market simultaneously
a. two equilibrium points, one before and one after a shift in the supply
given the demand and marginal cost displayed below, what is the consumer surplus with a profit-maximizing uniform-price monopolist? (ch. 11 graph q3)
abc
suppose there is a price floor of F in a market as displayed in the plot. which of the following areas represents the consumer surplus? (ch 10 graph q5)
abc
if ac(q) < mc (q), then what can we say
ac(q) is increasing
an isocost line represents
all combinations of inputs in which the firm has the same level of total cost
for a level of production Q1, such that 0 < MC(Q1) < MR(Q1), an increase in production will lead to?
an increase in profits, because cost will increase and revenue will increase even more
the output elasticity of total cost is: ________. if this is greater than 1 which of the following must be true
average cost is increasing
suppose demand is given Qd = 500 - 15P and supply is given by Qs = 5P. If the government imposes a $30 price floor the excess supply will be a. 150 b. 100 c. 25 d. 50
b. 100
suppose the price of good A is $20 per unit, the price of good B is 410 per unit, and the consumer's income is $1000 per month. the equation of the budget line is: a. 20A = 10B b. 1000 = 20A + 10B c. 1000 = 10A + 20B d. 1000 = A + B
b. 1000 = 20A + 10B
Suppose the market consists of two consumers. Consumer 1 has demand curve P = 32 - 3Q and consumer 2 has demand P = 16 - Q. What is the market demand when the price is 2? a. 8 b. 24 c. 10 d. 50
b. 24
Consider a market with demand Qd = 240 - 6P and supply Qs = 2P. What is the consumer surplus in this market? a. 500 b. 300 c. 1000 d. 720
b. 300
Consider a market for two horizontally differentiated products A and B. Which of the following reaction function for firm A would suggest the strongest differentiation between products A and B? a. Pa = 8 + Pb/100 b. Pa = 7 + Pb/1000 c. Pa = 9 + Pb/1 d. Pa = 6 + Pb/10
b. Pa = 7 + Pb/1000
Suppose a firm is producing sandals using labor L and capital K. The firm faces decreasing returns to scale. When they use 3 units of labor and 4 units of capital the produce Q = 100. If they use 9 units of labor and 12 units of capital which of the following could be a possible level of output? a. Q = 300 b. Q = 250 c. Q = 400 d. Q = 350
b. Q = 250
Which of the following would cause an unambiguous decrease (decrease for sure) in the equilibrium price in a market? a. a rightward shift in supply and rightward shift in demand b. a rightward shift in supply and a leftward shift in demand c. a leftward shift in supply and a leftward shift in demand d. a leftward shift in supply and a rightward shift in demand
b. a rightward shift in supply and a leftward shift in demand
which of the following statements is a comparative statics statement: a. the income elasticity of demand is positive b. an increase in the demand curve leads to an increase in prices c. the consumer is trying to maximize utility subject to their budget constraint d. the equilibrium is at the intersection of the supply and demand curve
b. an increase in the demand curve leads to an increase in prices
Which of the following statements is false? a. as the price of a normal good falls, the income effect will result in an increase in consumption of the good b. as the price of an inferior good increases, the income effect will induce the consumer to consume less of the good c. all giffen good are inferior goods d. if the price of a good falls, the substitution effect will always induce the consumer to consumer at least as much of the good as before the price change.
b. as the price of an inferior good increases, the income effect will induce the consumer to consume less of the good
suppose a firm is currently using L = 6 units of labor and that APl = 4 and MPl = 2. What can we say bout the average product at L = 6? a. average product is increasing b. average product is decreasing c. average product is constant d. none of the other answers are correct
b. average product is decreasing
Which of the following is a Nash Equilibrium in a first price auction where bidder 1 has a value v1= 4 and bidder 2 has a value v2= 10? ( assuming players can only bid full dollar amounts) a. bidder 1 bid b1 = 4 and bidder 2 bids b2 = 10 b. bidder 1 bids b1 = 4 and bidder 2 bids b2 = 5 c. bidder 1 bids b1 = 9 and bidder2 bids b2 = 10 d. bidder 1 bids b1 = 10 and bidder 2 bids b2 = 4 e. bidder 1 bids b1 = 10 and bidder 2 bids b2 = 9
b. bidder 1 bids b1 = 4 and bidder 2 bids b2 = 5
suppose the demand curve is QD = 135 - 5P. Identify the truthfulness of the following statements: I. there is at least one point (Q,P) on the demand curve where the price elasticity of demand is equal to Ep,q = -20 II. there is at least one point (Q,P) on the demand curve where the price elasticity of demand is equal to Ep,q =-1
b. both I and II are true
which of the following statements is false? a. demand is often both inelastic at market level and high elastic at the brand level. b. demand is both highly elastic at the market level and inelastic at the brand level c. brand-level price elasticity of demand is more negative that industry-level price elasticity of demand d. the distinction between market-level and brand-level elasticity reflects the impact of the availability of substitutes
b. demand is both highly elastic at the market level and inelastic at the brand level
for a given utility function U(x,y) = xy, what happens to the indifference curve U(x,y) = 100 as the income increases from I = 10 to I = 20? a. the indifference curve shifts to the northeast b. nothing c. none of the other answers are correct d. the indifference curve shifts to the southwest
b. nothing
which of the following assumptions on preferences is not needed to guarantee that the preferences can be represented with a utility function? a. preferences are transitive b. preferences are diminishing c. preferences satisfy "more is better" d. preferences are complete
b. preferences are diminishing
if indifference curves are upward sloping, this violates the assumption that preferences: a. are transitive b. require that more to be better c. upward sloping indifference curves do not violate any of the assumptions about preferences d. are complete
b. require that more to be better
If a consumer's preferences over goods x and y are complete, transitive and satisfy the "more is better" assumption, what is true? a. the consumer has diminishing marginal utility for at least one of the goods b. the consumer's preferences can be represented with a utility function. c. the consumer's set of available baskets can be determined d. the marginal rate of substitution is diminishing along at least one of the consumer's indifference curves
b. the consumer's preferences can be represented with a utility function.
the marginal rate of substitution MRSx,y(x,y) is equal to a. the slope of the indifference curve at point (x,y) b. the negative slope of the indifference curve at point (x,y) c. the negative slope of the budget line at point (x,y) d. the slope of the budget line at point (x,y)
b. the negative slope of the indifference curve at point (x,y)
an endogenous variable in the producer's cost minimization problem is: a. the production target b. the quantity of inputs c. the production function d. the price of inputs
b. the quantity of inputs
Identify the truthfulness of the following statements: I. It is a Nash equilibrium for professional athletes to take steroids. II. It is a Nash equilibrium for cigarette companies to advertise a. both I and II are true b. I is true and II is false c. Both II and I are false d. I is false and II is true
both I and II are true
when the government introduces a subsidy in a market, which of the following is true?
both consumer surplus and producer surplus increase
In a given market, the Cournot equilibrium is Q1 = 3 and Q2 = 3 and both firms earn π1 = π2 = 10. What should we expect to see in the Stackelberg equilibrium if firm 1 moves first? a. Q1 > 3 and π1 < 10 b. Q1 > 3 and π1 > 10 c. Q1 > 3 and π1 > 10 d. Q1 < 3 and π1 < 10
c. Q1 > 3 and π1 > 10
under a mixed strategy, a. players move sequentially b. players obtain lower payoffs than in a pure strategy equilibrium c. a player chooses among two or more pure strategies according to pre-specified probabilities d. the players may never reach a nash equilibrium
c. a player chooses among two or more pure strategies according to pre-specified probabilities
a measure of how quickly the marginal rate of technical substitution of labor for capital changes as we move along an isoquant is the: a. capital-labor ratio b. input substitution c. elasticity of substitution d. rate of technological progress
c. elasticity of substitution
Suppose that you are competing in a second-price auction for a painting, and your private value for the painting is vi = 8, how much should you bid on the painting to maximize your benefit? a. more than 8 dollars b. less than 8 dollars c. exactly 8 dollars d. exactly 0 dollars
c. exactly 8 dollars
suppose when the price of good x decreases, the income effect is negative. What can we say? a. good x is a normal good b. good x is a giffen good c. good x is an inferior good d. none of the other answers are correct
c. good x is an inferior good
In the equilibrium of a Cournot oligopoly model which of the following is not true as the number of firms increases: a. per firm profits will decrease to zero b. market quantity will increase c. market profit will increase d. price will drop to marginal cost e. per firm quantity will decrease to zero
c. market profit will increase
a measure of the rate of percentage change in quantity demanded with respect to price, holding all other determinants of demand constant is called the: a. price elasticity of equilibrium b. price elasticity of market equilibrium c. price elasticity of demand d. price elasticity of supply
c. price elasticity of demand
what happens to the Q = 100 isoquant after technological progress has occurred? a. shifts outward away from the origin b. the slope of the isoquant curve decreases c. shifts inward toward the origin d. the slope of the isoquant curve increases
c. shifts inward toward the origin
returns to scale refers to: a. the increase in output that accompanies an increase in one input, all other inputs held constant b. a change in a production process that enable a firm to achieve more output from a given combination of inputs c. the percentage by which output will increase when all inputs are increased by a given percentage d the number of units of increase in output that can obtained from an increase in one unit of input
c. the percentage by which output will increase when all inputs are increased by a given percentage
when there is more than one nash equilibrium, what is true? a. players don't typically play the nash equilibrium b. players will always play the one that gives them lower payoffs c. they could play either nash equilibrium d. players will always play the one that gives them higher payoffs
c. they could play either nash equilibrium
which of the following goods would we expect to have the most inelastic demand: a. fresh tomatoes b. foreign travel c. toothpicks d. iPads
c. toothpicks
suppose there is a tax of T in a market as displayed in the plot. which of the following areas represents the deadweight loss due to the tax? (ch. 10 graph q3)
ceg
suppose a monopolist face two markets: the US market with demand P = 15 - 3Q and the international market with demand p = 19 - 6Q. the monopolist currently does not discriminate and sets only one price that is used in both market. which of the following is true?
consumers in the US market would be better off if the monopolist could 3rd degree price discriminate
consider a market with demand p = 60 - 2q with N = 4 firms. In a model of Cournot oligopoly, what will the marginal revenue for firm 1 be: a) MR = 60 -Q1 -Q2 - Q3 -Q4 b) MR = 60 -2Q1 -Q2 - Q3 -Q4 c) MR = 60 -2Q1 -2Q2 - 2Q3 -2Q4 d) MR = 60 -4Q1 -2Q2 - 2Q3 -2Q4
d) MR = 60 -4Q1 -2Q2 - 2Q3 -2Q4
suppose the production function is Q = 3K^1/3L^2/3. What is the elasticity of substitution? a. 3 b. infinity c. 0 d. 1
d. 1
suppose that a consumer considers coffee and tea to be perfect substitutes, but he requires two cups of tea to give up one cup of coffee. this consumer's budget constraint can be written as 3C+T=10. What should the consumer buy? a. 4 cups of coffee and no tea b. 2 cups of tea and no coffee c. 3 cups of coffee and no tea d. 10 cups of tea and no coffee
d. 10 cups of tea and no coffee
Suppose the demand is given by Q = 10 - P. What is the consumer surplus when the price is P = 6? a. 18 b. 16 c. 12 d. 8
d. 8
consider a market with demand P = 40 - Q with three identical firms all with MC = 10 that are competing in a Cournot Oligopoly. If Q1 = 4 and Q2 = 10, what quantity would firm 3 want to set? a. 18 b. 26 c. 16 d. 8
d. 8
suppose the budget line is BL: x+y = 8 and suppose the tangency condition is satisfied at basket (x,y) = (3,5). Identify the truthfulness of the following statements: I. Basket (x,y) = (3,5) is the consumers utility maximizing basket. II. The slope of the indifference curve at point (x,y) = (3,5) is equal to the slope of the budget line. a. I is true and II is false b. Both I and II are false c. Both I and II are true d. I is false and II is true
d. I is false and II is true
which of the following utility functions has diminishing marginal rate of substituion: a. U(x,y) = 2x + y b. U(x,y) = x^2 + y c. U(x,y) = x^2 + y^2 d. U(x,y) = x^1/2y
d. U(x,y) = x^1/2y
an example of a situation where a player would want to use a mixed strategy is: a. an athlete considering taking performance enhancing drugs b. a company advertising cigarettes c. a company deciding to conform with a cartel or to cheat a cartel d. a player kicking a penalty kick in soccer
d. a player kicking a penalty kick in soccer
an endogenous variable in a consumer's choice problem would typically be: a. prices b. utility function c. income d. basket of goods
d. basket of goods
Which of the following pairs are and example of horizontally differentiated products? a. Coke and Walmart brand cola b. coke and coffee c. coke and tostitos tortilla chips d. coke and pepsi
d. coke and pepsi
suppose that Alex is currently spending all of his income. on 5 units of food (F) and 3 units of clothing (C). At his current consumption he has marginal utilities MUf = 2 and MUc = 1 and he faces prices Pf = 3 and Pc = 2. What can he do to increase his utility? a. consumer more of both F and C b. consume less of F and more C c. consume less of both F and C d. consume more F and less C
d. consume more F and less C
in a Bertrand Oligopoly a. each firm chooses simultaneously and non-cooperatively how much to produce to maximize its own profit b. one firm acts as a quantity leader, choosing it quantity first, while all other firms act as followers, choosing their quantities second and in reaction to the leader c. each firm makes its profits-maximizing decision while considering the entire market demand, the same as a monopolist d. each firm chooses simultaneously and non-cooperatively its own product's price to maximize its own profit
d. each firm chooses simultaneously and non-cooperatively its own product's price to maximize its own profit
which of the following statements represents normative analysis? a. eliminating the minimum wage leads to lower unemployment b. eliminating rent controls in NYC leads to greater supply of housing in the future c. raising taxes on gasoline will reduce automobile traffic on our nations highways d. farmers should be subsidized to produce corn ethanol as it will lead to a reduced dependence on foreign oil
d. farmers should be subsidized to produce corn for ethanol as it will lead to a reduced dependence on foreign oil
all basket in area to the northeast of indifference curve U1 but to the southwest of the budget line: a. give lower utility than U1 and are not available b. give higher utility than U1 and are not available c. give lower utility than U1 and are available d. giver higher utility than U1 and are available
d. giver higher utility than U1 and are available
kevin is trying to decide the best way to buy groceries with his income of I = $100, has two options. He can pay $30 go join the speciality grocery club and get groceries for $1 per unit. Alternatively, he can not join the club and can buy groceries for $2 per unit. Based on his utility function, he determines that his optimal basket is to purchase 35 units of groceries and spend the rest on the composite good. Based on this we can conclude that: a. kevin should not join the speciality grocery club b. no utility function would cause Kevin to purchase 35 units in his utility maximizing basket c. kevin is indifferent between joining and not joining d. kevin should join the speciality grocery club
d. kevin should join the speciality grocery club
When comparing a market with a profit-maximizing uniform-price monopolist to one with a Cournot duopoly equilibrium, which of the following is false: a. the cournot duopoly will have a lower deadweight loss b. the cournot duopoly will have a lower price c. the cournot duopoly will have a lower total profits (all firms combined) d. the cournot duopoly will have a lower market quantity produced e. the cournot duopoly will have a higher consumer surplus
d. the cournot duopoly will have a lower market quantity produced
suppose a firm faces production function Q1 = KL and Q2 = KL + K, what can we say? a. there has not been technological progress b. there has been capital-saving technological change c. there has been neutral technological change d. there has been labor-saving technological change
d. there has been labor-saving technological change
the region where the isoquant has positive slope, is called the: a. marginal rate of production b. economic region of production c. marginal rate of technical substitution d. uneconomic region of production
d. uneconomic region of production
Under what circumstance is the demand curve upward-sloping? a. when the good is an inferior good and the substitution effect outweighs the income effect b. when the good is a normal good c. the demand curve can never be upward-sloping d. when the good is an inferior. good and the income effect outweighs the substitution effect
d. when the good is an inferior. good and the income effect outweighs the substitution effect
suppose that the demand for widgets is Qw = 100 - 3Pw + 4Pg where Pg is the price of gadgets and Pw is the price of widgets. Which of the following is true: a. widgets and gadgets are sometimes complements and other times substitutes depending on the prices b. widgets and gadgets are demand complements c. widgets and gadgets are neither substitutes nor complements d. widgets and gadgets are demand substitutes
d. widgets and gadgets are demand substitutes
tesla selling cars with batteries that are limited by software is an example of
damaged goods
a firm price discriminates with an N-block tariff. as the number of blocks gets higher, which of the following happens?
deadweight loss increases
Suppose Jack and Jill are trying to buy an Item that is being auctioned off using a second-price auction. Jack bids $8 and Jill bids $2. Which of the following is true? a. jill wins and pays $2 b. jack wins and pays $8 c. jill wins and pays $6 d. jill wins and pays $8 e. jack wins and pays $2
e. jack wins and pays $2
comparative statics
examines how endogenous variables changes as exogenous factors change
which of the following is not a characteristic of perfect competiton?
firms produce differentiated products
with _________ degree price discrimination, the firm tries to price each unit at the consumer's reservation price
first
amazon.com selling different versions of a book (audiobook, kindle, paperback) would be an example of
first-degree price discrimination
which of the following would lead to the highest producer surplus for a monopolist in a market?
first-degree price discrimination
to solve the long-run cost-minimization problem, you do the following
fix an isoquant, and find the isocost line furthest to the southwest that still intersect the given isocost
an analysis that determines the equilibrium prices and quantities in more than one market simultaneously is called?
general equilibrium analysis
given the expansion path in the plot, what can we say? (ch. 7 graph)
labor is an inferior input and capital a normal input
a firm that has a production function with diminishing MRTS L,K is currently producing Q = 25 units of output at the cost minimizing combination of labor and capital. if the cost of capital decreases, then the new cost minimizing combination of labor and capital will have
more capital and less labor
if firms in a perfectly competitive market are earning positive profits in the long-run, what would happen
more firms would enter the market
under first-degree price discrimination
more than one of the other answers is correct
suppose a monopolist faces two markets and has constant marginal cost of MC = 3. The AZ market with demand P = 9-3Q and the NM market with demand P = 9-6Q. The monopolist currently does not discriminate and sets only one price that is used in both market. which of the following is true?
none of the other answers are correct
if a monopolist goes from charging a uniform-price to being able to third-degree price discriminate between two groups, which of the following is true
none of the other answers are true
when there is excess demand, which of the following is true?
none of the other answers are true
the total cost associated with isocost line increases as we move to the
northeast
a monopsony market is one with
one buyer and many sellers
In the long run in a perfectly competitive equilibrium
p = ac
suppose that a monopolist faces demand p = 45 - 2Q and MC = 15. If they want. to implement the profit maximizing two-block tariff, what prices would they set?
p1 = 35 and p2 = 25
which of the following markets would have the lowest deadweight loss? A market with a
perfect competition
which of the following would bead to an excess demand?
price ceiling
which of the following would lead to an excess supply?
price floor
if the demand curve is very elastic, then a monopolist will set:
price slightly higher than marginal cost
if a monopolist is producing where marginal revenue is less than marginal cost, then in order to increase profits, the monopolist should:
produce less
in the short-run, a firm in a perfectly competitive market will earn
profits that could be positive, negative or zero
as the demand curve shifts outward (increase in demand), a uniform-pricing monopolist's profit-maximizing
quantity will increase
los angeles has just introduced a new bike-sharing program. if you get a subscription for $20 a month, each minute ride costs $1.75. what type of price discrimination is this?
second-degree price discrimination
wildcat pizza charges students $4 for the first 10 slices of pizza they buy in a given year. any additional slices of pizza only cost the student $2 for the remainder of the year. this is an example o f
second-degree price discrimination
an endogenous variable in the firms cost-minimization problem would be
the amount of labor and capital
economies of scale occur when
the average cost is decreasing
if the incidence of tax is less than negative one (the demand curve is relatively more inelastic than the supply curve), what can we say?
the consumer will bear more of the burden of the tax than the producer
an example of an implicit cost for you if you decide to build your own house would be:
the cost of spending time working on the house rather than at your job
which of the following will make price discrimination difficult?
the firm is a price taker
which of the following is not a characteristic of perfect competition?
the industry does not have a lot of buyers and sellers
which of the following is a real-world example of tying?
the manufacturer of an instant-print camera is the only manufacturer of the film that the camera uses
the long-run total cost curve shows
the minimum total cost to produce any level of output, holding input prices fixed, and choosing all inputs to minimize cost
which statement about the long-run and short-run total cost curve is true?
the short-run total cost is greater than or equal to the long-run total cost
for a specific value of Q, if the output elasticity of total cost is greater than Etc,q = tc/q q/tc > 1, then
there are diseconomies of scale
in a perfectly competitive market with a price ceiling below the equilibrium value, what can we say?
there will be a range of values for the consumer surplus, but only one value for the producer surplus
in a perfectly competitive market with a subsidy, what can we say?
there will be one value for the consumer surplus and producer surplus
assume the amount of labor is on the x-axis and the amount of capital is on the y-axis. if the price of labor doubles, what happens to the slop of the isocost lines?
they become steeper (more negative)
intel spending additional money processing a computer chip to make it worse is an example of
third-degree price discrimination
wildcat pizza charges $4 to regular customers and $2 for students. this is an example of
third-degree price discrimination
suppose a firm has k bar units of capital in the short run, what can we say about the short-run cost minimizing combination of labor and capital? (ch.8 graph q5)
too much capital in the short run
a firm is trying to produce Qo = 100 units of output and faces a production function of Q(L,K) = LK. currently, the firm is producing 100 units of output, has MPl = 10 and MPk = 20, and faces a price of labor w = 1 per unit and price of capital r = 3 per unit
use less capital and more labor
if both prices increase proportionally by the same amount, that is w1 = alphaw2 and r1 = alpha r2, for alpha > 1, then the cost-minimizing combination of labor and capital
uses more of both inputs
what is the cost-minimizing combination of L and K for this firm with production target Qo = 100 (graph PM q13)
x
